On June 27, 2014, Magistrate Judge Orlando L. Garcia of the United States District Court for the Western District of Texas recommended denial of a plaintiff’s motion for summary judgment in an FDCPA action implicating settlement letter language for time-barred debt. The case, Schreve v. First National Collection Bureau, Inc., involved time-barred debt that had been part of a class arbitration award in favor of the creditor-defendant. The collection letter at issue extended a settlement offer and mentioned: “We are not obligated to renew this offer.” The letter contained no threats of litigation or statements that suit would be filed.
As part of its ruling, the court found that the Seventh Circuit Court of Appeals’ recent McMahon decision was not binding precedent. In McMahon, the appeals court held, in part, that plaintiffs had stated a claim for relief when they alleged they received a debt-collection letter offering to settle a time-barred debt because “a settlement offer on a time[-]barred debt implies that the creditor could successfully sue on the debt” and therefore can be misleading under the FDCPA. The court found that McMahon conflicted with Johnson, a prior decision by the court holding that a letter seeking to recover a time-barred debt which did not threaten litigation did not violate the FDCPA. Ultimately, the court stated that it “is not required to ignore existing direct case precedent and adopt the reasoning of a court outside the Fifth Circuit.”
Furthermore, the court held that the plaintiff had not defeated the assertion of the bona fide error defense such that it entitled him to summary judgment. The decision concluded with dicta from the court questioning the value of the amicus briefs filed by the Federal Trade Commission and Consumer Financial Protection Bureau:
Nor is the Court convinced, as plaintiff argues, that Goswami [v. American Collections Enterprise, Inc.] holds “it would be appropriate for [the] Court to consider and defer to the position of the FTC and the CFPB” set forth in the briefing attached to plaintiff’s motion for summary judgment. The Court in Goswami looked to FTC commentary for guidance only because it found an ambiguity in a provision of the FDCPA at issue . . . Further, contrary to plaintiff’s argument, the Court in Goswami held that “deference” to the FTC’s opinion letters was unwarranted.